HomeMy WebLinkAboutTIFA Tax Increment finance Authority 2020 Audit - Final Maner Maner Costerisan PC
2425 E.Grand River Ave.
Suite 1
sterisan Lansing,M1 489 1
T.517 323 750 750t3
Certified Public Accountants F.517 323 6346
Business&Technology Advisors www manercpa.com
December 18,2020
The Honorable Mayor,Members of the City Council of the City of Lansing,
and Members of the Board of Directors of the
Tax Increment Finance Authority of the City of Lansing
Lansing,Michigan
We have audited the financial statements of the governmental activities and the major fund of the Tax Increment
Finance Authority of the City of Lansing (the Authority), a discretely presented component unit of the City of
Lansing, Michigan, for the year ended June 30, 2020. Professional standards require that we provide you with
information about our responsibilities under generally accepted auditing standards and Government Auditing
Standards, as well as certain information related to the planned scope and timing of our audit. We have
communicated such information in our letter to City Council dated May 5, 2020. Professional standards also
require that we communicate to you the following information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by Tax Increment Finance Authority of the City of Lansing are described in Note 1 to
the financial statements. No new accounting policies were adopted,and the application of existing policies was
not changed during the year ended June 30,2020. We noted no transactions entered into by the Authority during
the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been
recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are based
on management's knowledge and experience about past and current events and assumptions about future
events. Certain accounting estimates are particularly sensitive because of their significance to the financial
statements and because of the possibility that future events affecting them may differ significantly from those
expected. The most sensitive estimate affecting the financial statements was:
Investments are carried at fair value, which is defined as the amount that the Authority could reasonably
expect to receive for an investment in a current sale between a willing buyer and a willing seller and is
generally measured by quoted market prices.
We evaluated the key factors and assumptions used to develop this estimation in determining that it is
reasonable in relation to the financial statements taken as a whole.
The financial statement disclosures are neutral,consistent,and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
For purposes of this communication, professional standards require us to accumulate all known and likely
misstatements identified during the audit, other than those that we believe are trivial, and communicate them
to the appropriate level of management. Further, professional standards require us to also communicate the
effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account
balances or disclosures,and the financial statements as a whole and each applicable opinion unit. In addition,
professional standards require us to communicate to you all material, corrected misstatements that were
brought to the attention of management as a result of our audit procedures. The material misstatements
detected as a result of audit procedures and corrected by management are described in connection with our
report on internal control over financial reporting.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing
matter,whether or not resolved to our satisfaction,that could be significant to the financial statements or the
auditor's report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated December 18,2020.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of
an accounting principle to the Authority's financial statements or a determination of the type of auditor's opinion
that may be expressed on those statements, our professional standards require the consulting accountant to
check with us to determine that the consultant has all the relevant facts. To our knowledge,there were no such
consultations with other accountants.
OtherAudit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards, with management each year prior to retention as the Authority's auditors. However, these
discussions occurred in the normal course of our professional relationship and our responses were not a
condition to our retention.
Other Matters
We applied certain limited procedures to the management's discussion and analysis and budgetary comparison
schedule,which are required supplementary information (RSI) that supplement the basic financial statements.
Our procedures consisted of inquiries of management regarding the methods of preparing the information and
comparing the information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We did not
audit the RSI and do not express an opinion or provide any assurance on the RSI.
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Restriction on Use
This information is intended solely for the use of the City Council of the City of Lansing,the Board of Directors,
and management of the City of Lansing and of the Tax Increment Finance Authority of the City of Lansing and is
not intended to be,and should not be,used by anyone other than these specified parties.
Very truly yours,
3
TAX INCREMENT FINANCE AUTHORITY
OF THE CITY OF LANSING
REPORT ON FINANCIAL STATEMENTS
(with required supplementary information)
YEAR ENDED JUNE 30, 2020
Manor
Costerisan 13'Wic ntert&
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TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT.........................................................................................................................................1-2
MANAGEMENT'S DISCUSSION AND ANALYSIS....................................................................................................................3-5
BASICFINANCIAL STATEMENTS...................................................................................................................................................6
Government-wide Financial Statements
Statementof Net Position..........................................................................................................................................................7
Statementof Activities................................................................................................................................................................8
Governmental Fund Financial Statements
BalanceSheet..................................................................................................................................................................................9
Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position.......................10
Statement of Revenues,Expenditures,and Changes in Fund Balance.................................................................11
Reconciliation of the Statement of Revenues,Expenditures,and Changes in Fund Balance
of the Governmental Fund to the Statement of Activities......................................................................................12
Notesto Financial Statements................................................................................................................................................13-21
REQUIRED SUPPLEMENTARY INFORMATION......................................................................................................................22
BudgetaryComparison Schedule.............................................................................................................................................23
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN
AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENTAUDITING STANDARDS.....................................................................................................................24-26
Maner Maner Costerisan PC
2425 E.Grand River Ave.
Suite 1
sterisan Lansing,M1 489 1
T.517 323 750 7500
Certified Public Accountants F.517 323 6346
Business&Technology Advisors www manercpa.com
INDEPENDENT AUDITORS'REPORT
The Honorable Mayor,Members of the City Council of the City of Lansing,and
Members of the Board of Directors of the
Tax Increment Finance Authority of the City of Lansing
Lansing,Michigan
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities and the major fund of
the Tax Increment Finance Authority of the City of Lansing (the Authority), a discretely presented component
unit of the City of Lansing, Michigan, as of and for the year ended June 30, 2020, and the related notes to the
financial statements,which collectively comprise the Authority's basic financial statements as listed in the table
of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement,whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the financial statements,whether due to fraud or error. In making those
risk assessments,the auditor considers internal control relevant to the entity's preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly,
we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
Opinions
In our opinion,the financial statements referred to above present fairly,in all material respects,the respective
financial position of the governmental activities and the major fund of the Tax Increment Finance Authority of
the City of Lansing as of June 30,2020,and the respective changes in financial position for the year then ended
in accordance with accounting principles generally accepted in the United States of America.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis and the budgetary comparison schedule,as identified in the table of contents,be presented
to supplement the basic financial statements. Such information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board,who considers it to be an essential
part of financial reporting for placing the basic financial statements in an appropriate operational,economic,or
historical context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted of
inquiries of management about the methods of preparing the information and comparing the information for
consistency with management's responses to our inquiries,the basic financial statements,and other knowledge
we obtained during our audit of the basic financial statements. We do not express an opinion or provide any
assurance on the information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide anyassurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2020,
on our consideration of the Tax Increment Finance Authority of the City of Lansing's internal control over
financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts,
grant agreements,and other matters. The purpose of that report is to describe the scope of our testing of internal
control over financial reporting and compliance and the results of that testing,and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral part of an audit performed
in accordance with Government Auditing Standards in considering the Authority's internal control over financial
reporting and compliance.
December 18,2020
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Tax Increment Finance Authority of the City of Lansing (the "Authority") was established by the City of
Lansing (the "City") on May 26, 1981, under the authority contained in Act 450, Michigan Public Acts of 1980
(the "Act"). The Authority presents this management's discussion and analysis of its financial performance as
an overview of financial activities for the fiscal year ended June 30,2020.
Using this Annual Report
The discussion and analysis is intended to serve as an introduction to the Authority's basic financial statements.
The basic financial statements are comprised of the following:
➢ The statement of net position presents information on all of the Authority's assets,deferred outflows of
resources and liabilities,with the difference reported as net position. Over time,increases or decreases
in net position may serve as a useful indicator of whether the financial position of the Authority is
improving or deteriorating.
➢ The statement of activities presents information showing how the Authority's net position changed
during the most recent fiscal year.
➢ The governmental fund balance sheet presents information on the Authority's assets and liabilities,with
the difference between the two reported as fund balance.
➢ The statement of revenues,expenditures and change in fund balance-general fund presents information
showing the Authority's actual revenues and expenditures for the most recent fiscal year on the fund
level perspective.
➢ The notes to financial statements provide additional information that is essential to a full understanding
of the data provided in the basic financial statements.
Government-wide Financial Statements. The net position of the Authority is summarized for the purpose of
determining the overall financial position. The Authority's liabilities exceeded assets and deferred outflows of
resources by$40,648,804 at the end of the fiscal year. This is the result of recognizing the entire amount of
outstanding debt(full accrual accounting),without a corresponding receivable for taxes to be captured in future
periods (which cannot be accrued in accordance with generally accepted accounting principles). The long-term
liabilities are anticipated to be paid by the Authority in annual debt service payments over the next 20 years and
the City has also pledged its limited full faith and credit for the repayment of the long-term obligations. The
revenue source for these payments will be from annual property tax increments captured by the Authority from
the TIFA District. The Authority's current and future yearly tax capture increments are projected by the
Authority to be sufficient to make the future scheduled annual debt service payments.
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A comparative analysis of the data is presented below:
Governmental
Activities
2020 2019
Assets
Current and other assets $ 1,756,650 $ 1,158,883
Restricted assets 2,507,708 2,758,415
Total assets 4,264,358 3,917,298
Deferred Outflows 935,439 1,090,578
Liabilities
Other liabilities 258,737 214,705
Long-term obligations 45,589,864 44,695,337
Total liabilities 45,848,601 44,910,042
Net Position
Unrestricted (deficit) $ (40,648,804) $ (39,902,166)
When comparing the current fiscal year to the previous fiscal year, net position decreased by $746,638, as
compared to the prior year decrease in net position of$580,367. The main cause for this change is an increase
in interest expense related to long-term debt of over$850,000.
Governmental
Activities
2020 2019
Revenues
General revenues $ 3,514,492 $ 3,010,034
Expenses 4,261,130 3,590,401
Change in net position (746,638) (580,367)
Net position,beginning of year (39,902,166) (39,321,799)
Net position,end of year $ (40,648,804) $ (39,902,166)
General Fund Financial Analysis
At the end of the current fiscal year, the Authority's governmental fund (the general fund) reported an ending
fund balance of$4,116,244, an increase of$198,946 in comparison to the prior year. The primary reason for
this increase is an increase in property tax revenue of over$500,000.
4
General Fund Budgetary Highlights
In accordance with State statute,the Authority adopts a budget annually prior to the commencement of the fiscal
year. The budget may be amended during the year by formal resolution of the Board of Directors.
Property tax revenue was $239,580 over budget. Tax revenues came in higher than expected primarily due to
personal property values being greater than the preliminary projections.
Capital Assets. The Authority has no capital assets at this time.
Long-term Obligations Administration
At the end of the current fiscal year,the Tax Increment Finance Authority of the City of Lansing had total long-
term obligations outstanding of$45,589,864. General obligation bonds are direct obligations and pledge the full
faith and credit of the City of Lansing,Michigan. These bonds are outstanding with varying amounts of principal
maturing until 2040.
Outstanding Debt
2020 2019
General obligation bonds $ 27,600,000 $ 27,860,758
Lease contract
Principal 11,029,889 11,029,889
Accreted interest 7,026,398 5,877,152
Unamortized discount on bonds (66,423) (72,462)
Total outstanding debt $ 45,589,864 $ 44,695,337
Additional information on the Authority's long-term obligations can be found in Note 5 of the financial
statements.
Economic Factors
The Tax Increment Finance Authority of the City of Lansing's expenses are governed by the laws of the State of
Michigan and bond indenture covenants. These laws and covenants determine how bond proceeds are spent
and how and when debt retirement payments are made.
Requests for Information
This financial report is designed to provide a general overview of the Tax Increment Finance Authority of the
City of Lansing finances and to show accountability for the money it receives and expends. Additional
information on the Authority can be found on the City of Lansing's website at www.lansingmi.gov. Questions
concerning any of the information provided in this report or requests for additional financial information should
be addressed to: 1000 S.Washington Avenue,Suite 201,Lansing,Michigan 48910-3201.
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BASIC FINANCIAL STATEMENTS
6
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
STATEMENT OF NET POSITION
JUNE 30,2020
Governmental
Activities
ASSETS
Cash and cash equivalents $ 1,756,650
Restricted cash,cash equivalents,and investments 2,507,708
TOTAL ASSETS 4,264,358
DEFERRED OUTFLOWS OF RESOURCES
Deferred charge on bond refunding 935,439
LIABILITIES
Accounts payable 148,114
Accrued interest payable 110,623
Long-term obligations (due in more than one year) 45,589,864
TOTAL LIABILITIES 45,848,601
NET POSITION
Unrestricted (deficit) $ (40,648,804L
See accompanying notes to financial statements.
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30,2020
Governmental
Activities
Expenses
Development expenses $ 721,451
Interest on long-term debt 3,539,679
Total expenses 4,261,130
General revenues
Property taxes 3,418,580
Investment earnings 95,912
Total general revenues 3,514,492
Change in net position (746,638)
Net position,beginning of the year (39,902,166)
Net position,end of the year $ (40,648,804)
See accompanying notes to financial statements.
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
GOVERNMENTAL FUND
BALANCESHEET
JUNE 30,2020
General
ASSETS
Cash and cash equivalents $ 1,756,650
Restricted cash,cash equivalents,and investments 2,507,708
TOTAL ASSETS $ 4,264,358
LIABILITIES
Accounts payable $ 148,114
FUND BALANCE
Restricted for debt service 2,507,708
Unassigned 1,608,536
TOTAL FUND BALANCE 4,116,244
TOTAL LIABILITIES AND FUND BALANCE $ 4,264,358
See accompanying notes to financial statements.
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE
SHEET TO THE STATEMENT OF NET POSITION
JUNE 30,2020
Total fund balance-governmental fund $ 4,116,244
Amounts reported for the governmental activities in the statement of net position are
different because:
Long-term liabilities are not due and payable in the current period and therefore are
not reported in the governmental funds balance sheet. Long-term liabilities and
related items at year-end consist of:
Long-term obligations $ (38,563,466)
Deferred charge on bond refunding 935,439
Accrued and accreted interest on long-term obligations (7,137,021)
(44,765,048)
Net position of governmental activities $ (40,648,804)
See accompanying notes to financial statements.
10
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
GOVERNMENTALFUND
STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE
YEAR ENDED JUNE 30,2020
General
REVENUES
Property taxes $ 3,418,580
Interest 95,912
TOTAL REVENUES 3,514,492
EXPENDITURES
Current
Operating 148,114
Capital projects-courts 571,900
Debt service
Principal 260,758
Interest and fiscal charges 2,333,337
Other costs 1,437
TOTAL EXPENDITURES 3,315,546
NET CHANGE IN
FUND BALANCE 198,946
Fund balance,beginning of year 3,917,298
Fund balance,end of year $ 4,116,244
See accompanying notes to financial statements.
11
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN
FUND BALANCE OF THE GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30,2020
Net change in fund balance-governmental fund $ 198,946
Amounts reported for governmental activities in the statement of activities are different
because:
Repayment of long-term obligations and borrowings of long-term obligations are
reported as expenditures and other financing sources in governmental funds, but the
repayment reduces long-term liabilities and the borrowings increase long-term
liabilities in the statement of net position. In the current year, these amounts consist
of:
Principal payments on long-term obligations 260,758
Some items reported in the statement of activities do not require the use of current
financial resources and therefore are not reported as expenditures in governmental
funds. These activities consist of:
Amortization of deferred issuance discounts and
deferred charge on bond refunding $ (161,178)
Change in accreted interest on lease contract
and accrued interest payable (1,045,164)
(1,206,342)
Change in net position of governmental activities $ (746,638)
See accompanying notes to financial statements.
12
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Tax Increment Finance Authority of the City of Lansing (the "Authority"), a component unit of the City of
Lansing,was established by the City of Lansing(the "City") on May 26, 1981,under the authority contained in
Act 450, Michigan Public Acts of 1980 (the "Act"). The Act authorizes the City to designate specific districts
within its corporate limits as Tax Increment Finance Authority Districts (the "Districts"). The Authority is
appointed to preside over such Districts, and it is authorized to formulate plans for public improvements,
economic development, neighborhood revitalization and historic preservation within the Districts. The Act
allows the Authority to participate in a broad range of improvement activities intended to contribute to
economic growth and prevent property value deterioration. Tax increment financing plans must be approved
by the City.
The Authority is a component unit of the City because the City appoints the Authority's Board of Directors,it has
the ability to significantly influence the Authority's operations,and it is financially accountable for the Authority
as defined under GASB Statement No. 61, The Financial Reporting Entity. Omnibus -An Amendment of GASB
Statements No. 14 and No.34. Accordingly,the Authority is presented as a discrete component unit in the City's
financial statements and is an integral part of that reporting entity.
Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities)
report information on all of the non-fiduciary activities of the Authority.
The statement of activities demonstrates the degree to which the direct expenses of a given function or
identifiable activity are offset by program revenues. Direct expenses are those that are clearly identifiable
activities with a specific function or identifiable activity. Program revenues include 1) charges to customers or
applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a function or
identifiable activity and 2)grants and contributions that are restricted to meeting the operational requirement
of a particular function or identifiable activity. Property taxes are reported as general revenues.
Measurement Focus.Basis of Accounting.and Financial Statement Presentation
The government-wide financial information is reported using the economic resources measurement focus and
the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability
is incurred,regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year
for which they are levied.
Governmental fund financial information is reported using the current financial resources measurement focus
and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and
available. Revenues are considered to be available when they are collectible within the current period or soon
enough thereafter to pay liabilities of the current period. For this purpose,the Authority considers revenues to
be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally
are recorded when a liability is incurred,as under accrual accounting. However,debt service expenditures are
recorded only when payment is due.
Property taxes and interest associated with the current fiscal period are all considered to be susceptible to
accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are
considered to be measurable and available only when cash is received by the government.
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Measurement Focus.Basis of Accounting.and Financial Statement Presentation (continued)
The Authority reports a single major governmental fund-the general fund. The general fund is the Authority's
primary operating fund. It accounts for all financial resources of the Authority,except those accounted for and
reported in another fund,if any.
Budgets and Budgetary Accounting
The Authority has established the following procedures for determining the budgetary data presented in the
accompanying financial statements:
a. The secretary of the Authority's Board of Directors submits to the City Council of the City of Lansing a
proposed operating budget for the fiscal year commencing the following July 1. The budget includes
proposed expenditures and the means of financing them.
b. A public hearing is conducted to obtain taxpayer comments.
c. Prior to July 1, the budget is legally adopted by City Council resolution, pursuant to the Uniform
Budgeting and Accounting Act (P.A. 2 of 1968, as amended). This act requires that the budget be
amended prior to the end of the fiscal year when necessary to adjust appropriations if it appears that
revenues and other financing sources will be less than anticipated or to allow expenditures in excess of
original estimates. Expenditures shall not be made or incurred unless authorized in the budget and shall
not exceed the amount appropriated.
d. Formal budgetary integration is employed as a management control device during the year for the funds.
e. Budgets are adopted on a basis consistent with generally accepted accounting principles.
f. Expenditures may not exceed budget at the activity level.
Deposits and Investments
The Authority's cash and cash equivalents are considered to be cash on hand and demand deposits and amounts
held by the City of Lansing,Michigan for the benefit of the Authority.
Restricted cash consists of amounts required to be maintained separately in accordance with bond covenants.
Investments are stated at fair value. Securities traded on a national or international exchange are valued at the
last reported sales price at current exchange rates. Investments that do not have established market values are
reported at estimated fair value. Cash deposits are reported at carrying amounts, which reasonably
approximates fair value.
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deposits and Investments (continued)
In accordance with Michigan Compiled Laws,the Authority is authorized to invest in the following investment
vehicles:
a. Bonds,securities,and other obligations of the United States or an agency or instrumentality of the United
States.
b. Certificates of deposit,savings accounts,deposit accounts,or depository receipts of a State or nationally
chartered bank or a State or Federally chartered savings and loan association, savings bank, or credit
union whose deposits are insured by an agency of the United States government and which maintains a
principal office or branch office located in this State under laws of this State or the United States, but
only if the bank,savings and loan association,savings bank or credit union is eligible to be a depository
of surplus funds belonging to the State under Section 6 of 1855 PA 105,MCL 21.146.
c. Commercial paper rated at the time of purchase within the two highest classifications established by not
less than two standard rating services and that matures not more than 270 days after the date of
purchase.
d. Bankers'acceptances of United States banks.
e. The United States government or Federal agency obligations repurchase agreements.
f. Mutual funds composed of investment vehicles,which are legal for direct investment by local units of
government in Michigan.
The Authority follows the investment policy of the City of Lansing.
Deferred Outflows of Resources
In addition to assets,the statement of financial position will sometimes report a separate section for deferred
outflows of resources. This separate financial statement element, deferred outflows of resources,represents a
consumption of net position that applies to one or more future periods and so will not be recognized as an
outflow of resources (expense) until then. The Authority only has one item that qualifies for reporting in this
category,which is the deferred charge on bond refunding. A deferred charge on bond refunding results from
the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and
amortized over the shorter of the life of the refunded or refunding debt.
15
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Long-term Obligations
In the government-wide financial statements,long-term obligations are reported as a liability. Bond discounts,
if any,are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are
reported net of the applicable bond discount. Bond issuance costs are expensed as incurred.
In the fund financial statements, governmental fund types recognize bond discounts,as well as bond issuance
costs,during the period in which new debt is issued. The face amount of obligations issued are reported as an
other financing source. Discounts on debt issuances are reported as other financing uses. Issuance costs,
whether or not withheld from the actual debt proceeds received,are reported as debt service expenditures.
Fund Equitv
Governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either
(a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted fund
balance is reported when externally imposed constraints are placed on the use of resources by grantors,
contributors, or laws or regulations of other governments. Committed fund balance, if any, is reported for
amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the
government's highest level of decision-making authority, the Board of Directors. A formal resolution of the
Board of Directors is required to establish,modify,or rescind a fund balance commitment. The Authority reports
assigned fund balance for amounts that are constrained by the government's intent to be used for specific
purposes,but are neither restricted nor committed. The Authority currently has no assigned or committed fund
balance,as the Board of Directors has not yet given the authority for the making of such constraints. Unassigned
fund balance is the residual classification for the general fund.
When the Authority incurs an expenditure for purposes for which various fund balance classifications can be
used, it is the Authority's policy to use restricted fund balance first, then committed, assigned, and finally
unassigned fund balance.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
NOTE 2 -NET POSITION/FUND BALANCE
The statement of net position shows an unrestricted deficit of $40,648,804 which is due to the full accrual
accounting of all long-term debt,without reflecting a corresponding receivable for tax captures to be received
in future periods(which cannot be accrued in accordance with generally accepted accounting principles). Total
fund balance amounts to a positive balance of$4,116,244,and unassigned fund balance amounts to$1,608,536.
16
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - DEPOSITS AND INVESTMENTS
Following is a reconciliation of deposit balances as of June 30, 2020:
Statement of net position
Cash and cash equivalents $ 1,756,650
Restricted cash,cash equivalents,and investments 2,507,708
Total $ 4,264,358
Deposits and investments
Cash and cash equivalents in money market accounts
and pooled cash at the City of Lansing $ 2,273,799
Investments 1,990,559
$ 4,264,358
Custodial Credit Risk- Deposits
Custodial credit risk is the risk that in the event of a bank failure,the Authority's deposits may not be returned.
State law does not require,and the Authority does not have a policy for deposit custodial credit risk. As of year-
end, $2,257,708 of the Authority's bank balance of$2,507,708 was exposed to custodial credit risk because it
was uninsured and uncollateralized for the accounts that were specifically held in the Authority's name.
A portion of the above deposits and investments are held by the City of Lansing,Michigan. Those specific deposit
and investment accounts are not held in the name of the Authority. The amount of federal depositary insurance
and custodial credit risk of investments is determined for the City of Lansing, Michigan as a whole, and cannot
be separately identified for the Authority related to these accounts.
The Authority's investment policy does not specifically address this risk, although the Authority believes that
due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure all bank
deposits. As a result,the Authority evaluates each financial institution with which it deposits Authority funds
and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level
are used as depositories.
Custodial Credit Risk-Investments
As of June 30, 2020, the Authority's investments consisted of U.S. government debt securities totaling
$1,990,559.
For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the
Authority will not be able to recover the value of its investments or collateral securities that are in the possession
of an outside party. State law does not require,and the Authority does not have a policy for investment custodial
credit risk. On the investments listed above, there is no custodial credit risk, as these investments are
uncategorized as to credit risk.
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - DEPOSITS AND INVESTMENTS (continued)
Credit Risk
State law limits investments to specific government securities, certificates of deposit and bank accounts with
qualified financial institutions, commercial paper with specific maximum maturities and ratings when
purchased,bankers acceptances of specific financial institutions, qualified mutual funds and qualified external
investment pools as identified in the list of authorized investments in the summary of significant accounting
policies. The Authority's investment policy does not have specific limits in excess of state law on investment
credit risk. Credit risk ratings,where applicable,are summarized as follows:
S&P AA+ $ 1,301,812
Unrated 688,747
Total $ 1,990,559
Interest Rate Risk
State law limits the allowable investments and the maturities of some of the allowable investments as identified
in the summary of significant accounting policies. The Authority's investment policy does not have specific limits
in excess of state law on investment maturities as a means of managing its exposure to fair value losses arising
from increasing interest rates. For investments held at year-end maturities are as follows:
Due within 1 year $ 321,722
Due in 1 -5 years 1,668,837
Total $ 1,990,559
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of the Authority's investment in a
single issuer. State law limits allowable investments but does not limit concentration of credit risk as identified
in the list of authorized investments in the summary of significant accounting policies. The Authority's
investment policy does not have specific limits in excess of state law on concentration of credit risk. All
investments held at year-end are reported above.
Fair Value Measurements
The Authority categorizes its fair value measurements within the fair value hierarchy established by generally
accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of
the asset. Level 1 inputs are quoted prices in active markets for identical assets; level 2 inputs are significant
other observable inputs; level 3 inputs are significant unobservable inputs. As of June 30, 2020, all of the
Authority's investments were classified as level 2 fair value.
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 4-LEASE CONTRACTS
The Authority entered into a 20-year lease contract with the City of Lansing to assist in the financing of various
automobile parking structures and lots. On September 1, 2009,the lease agreement was amended extending
the payment schedule through 2039. Upon termination of the contract,the City shall convey the project and the
sites to the Authority without consideration if permissible under the City Charter and applicable State law. The
lease amortization is disclosed in Note S.
The Authority has entered into a payment agreement with the City to use excess tax increment revenues to make
lease payments pursuant to an operating lease between the City and the City of Lansing and County of Ingham
Joint Building Authority (the "Joint Authority") related to the City's use of a building constructed by the Joint
Authority. The total of such payments amounted to$571,900 for the year ended June 30,2020.
NOTE 5 -LONG-TERM OBLIGATIONS
The following is a summary of long-term obligations of the Authority for the year ended June 30, 2020:
Amounts
Balance Balance Due Within
July 1,2019 Additions Deletions June 30,2020 One Year
General obligation bonds $ 27,860,758 $ $ (260,758) $ 27,600,000 $
Direct borrowings and direct placements
Lease contract 11,029,889 11,029,889
Total 38,890,647 (260,758) 38,629,889
Add accreted interest on lease contract 5,877,152 1,149,246 - 7,026,398
Less unamortized discount on general
obligation bonds (72,462) - 6,039 (66,423)
$ 44,695,337 $ 1,149,246 $ (254,719) $ 45,589,864 $
General Obligation Bonds
$3,720,000 2014 refunding bonds due in amounts ranging from $395,000
through $545,000 plus interest at 4.75% through 2039 (limited tax, general
obligation). $ 3,720,000
$16,150,000 2017 refunding bonds due in amounts ranging from $435,000
through $1,640,000 plus interest ranging from 3.305% to 4.075% through
2040 (limited tax,general obligation). 16,150,000
$7,730,000 2019 refunding bonds due in amounts ranging from $865,000
through $1,335,000 plus interest ranging from 3.050% to 3.680% through
2031 (limited tax,general obligation). 7,730,000
Total general obligation bonds $ 27,600,000
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 5 -LONG-TERM OBLIGATIONS (continued)
Direct Borrowings and Direct Placements
$49,660,000 1994 lease contract due in annual installments ranging from
$533,923 to $2,113,374 through 2039. Interest is charged semi-annually at
3.35%. Any unpaid interest in a given year is accreted. $ 11,029,889
Annual debt service requirements to maturity for the Authority's long-term obligations is as follows:
Governmental Activities
General Direct Borrowings
Year Ending Obligation Bonds and Direct Placements
June 30, Principal Interest Principal Interest
2021 $ - $ 1,067,034 $ - $ 1,364,678
2022 - 1,067,034 - 1,157,090
2023 - 1,067,034 - 1,096,410
2024 - 1,067,034 - 1,030,242
2025 865,000 1,067,034 - 767,510
2026-2030 8,790,000 4,590,657 - 4,828,062
2031-2035 8,450,000 2,921,291 2,161,795 4,364,424
2036-2040 9,495,000 1,051,142 8,868,094 1,692,513
$ 27,600,000 $ 13,898,260 $ 11,029,889 $ 16,300,929
NOTE 6-PROPERTY TAXES
Property tax revenue is derived pursuant to a tax increment financing agreement between the Authority and
various applicable taxing districts. Real and personal property taxes are levied and attach as an enforceable lien
on properties located within the boundaries of the tax increment financing district. The City of Lansing bills and
collects the taxes on behalf of the Authority. Delinquent taxes on ad valorem real property are purchased by the
County of Ingham. Property tax revenue is recognized when levied in the government-wide financial statements
and in the fund financial statements to the extent that it results in current receivables.
Except for property taxes captured from local schools that exceed contractual obligations, the Authority is
entitled to all taxes levied on property within the Tax Increment Finance Authority of the City of Lansing for local
school levies to the extent that the current taxable value exceeds the base year taxable value.
NOTE 7-RELATED PARTY TRANSACTIONS
The Economic Development Corporation of the City of Lansing (EDC) provides administrative services to the
Authority;the Authority and the EDC share a common board of directors.
Administrative fees, consisting of operating costs charged to the Authority by EDC, were $148,114. The
Authority has no liability for compensated absences or pension benefits.
20
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 8-RISK MANAGEMENT
The Authority,as a discretely presented component unit of the City of Lansing,is exposed to various risks of loss
that are covered by the City's policies, including losses related to issues of cyber security, liability, errors and
omissions,flood,boiler and machinery,property,employee bonding,crime,and workers'compensation which
is covered through the Authority's insurance policies. The Authority carries commercial insurance to cover
these risks. Settled claims relating to the commercial insurance have not exceeded the amount of insurance
coverage during the past three years.
NOTE 9-UPCOMING ACCOUNTING PRONOUNCEMENTS
In June 2017,the GASB issued Statement No.87,Leases. This Statement increases the usefulness of governments'
financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were
classified as operating leases and recognized as inflows of resources or outflows of resources based on the
payment provisions of the contract. The Authority is currently evaluating the impact this standard will have on
the financial statements when adopted during the 2021-2022 fiscal year.
In May 2019,the GASB issued Statement No.91,Conduit Debt Obligations. This Statement will improve financial
reporting by eliminating the existing option for issuers to report conduit debt obligations as their own liabilities,
thereby ending significant diversity in practice. The clarified definition will resolve stakeholders'uncertainty as
to whether a given financing is, in fact, a conduit debt obligation. Requiring issuers to recognize liabilities
associated with additional commitments extended by issuers and to recognize assets and deferred inflows of
resources related to certain arrangements associated with conduit debt obligations also will eliminate diversity,
thereby improving comparability in reporting by issuers. Revised disclosure requirements will provide financial
statement users with better information regarding the commitments issuers extend and the likelihood that they
will fulfill those commitments. That information will inform users of the potential impact of such commitments
on the financial resources of issuers and help users assess issuers' roles in conduit debt obligations. The
Authority is currently evaluating the impact this standard will have on the financial statements when adopted
during the 2022-2023 fiscal year.
In May 2020,the GASB issued Statement No.96,Subscription-based Information Technology Arrangements. This
Statement provides guidance on the accounting and financial reporting for subscription-based information
technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a
SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset - an intangible asset - and a
corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription
payments,including implementation costs of a SBITA;and (4) requires note disclosures regarding a SBITA. To
the extent relevant,the standards for SBITAs are based on the standards established in Statement No.87,Leases,
as amended. The Authority is currently evaluating the impact this standard will have on the financial statements
when adopted during the 2022-2023 fiscal year.
NOTE 10- SUBSEQUENT EVENT
Subsequent to year end,the Authority has approved borrowing$4,485,000 of refunding bonds to refund the
2014 Refunding Bonds as described in Note 5.
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REQUIRED SUPPLEMENTARY INFORMATION
22
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
GENERAL FUND
BUDGETARY COMPARISON SCHEDULE
YEAR ENDED JUNE 30,2020
Variance with
Final Final Budget
Original Amended Positive
Budget Budget Actual (Negative)
REVENUES
Property taxes $ 3,179,000 $ 3,179,000 $ 3,418,580 $ 239,580
Interest 115,000 115,000 95,912 (19,088)
TOTAL REVENUES 3,294,000 3,294,000 3,514,492 220,492
EXPENDITURES
Current
Operating 158,450 158,450 148,114 10,336
Capital projects-courts 573,000 573,000 571,900 1,100
Debt service
Principal 260,758 260,758 260,758 -
Interest and fiscal charges 2,516,242 2,516,242 2,333,337 182,905
Other costs - - 1,437 (1,437)
TOTAL EXPENDITURES 3,508,450 3,508,450 3,315,546 192,904
NET CHANGE IN FUND BALANCE (214,450) (214,450) 198,946 413,396
Fund balance,beginning of year 3,917,298 3,917,298 3,917,298 -
Fund balance,end of year $ 3,702,848 $ 3,702,848 $ 4,116,244 $ 413,396
23
Maner Maner Costerisan PC
2425 E.Grand River Ave.
Suite 1
sterisan Lansing,M1 489 1
T.517 323 750 7500
Certified Public Accountants F.517 323 6346
Business&Technology Advisors www manercpa.com
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND
ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
The Honorable Mayor,Members of the City Council of the City of Lansing,and
Members of the Board of Directors of the
Tax Increment Finance Authority of the City of Lansing
Lansing,Michigan
We have audited,in accordance with the auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States,the financial statements of the governmental activities and the major
fund of the Tax Increment Finance Authority of the City of Lansing (the Authority), a discretely presented
component unit of the City of Lansing,Michigan,as of and for the year ended June 30,2020,and the related notes
to the financial statements, which collectively comprise the Authority's basic financial statements and have
issued our report thereon dated December 18,2020.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements,we considered the Authority's internal control
over financial reporting(internal control) as a basis for designing audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinion on the financial statements,but not for the purpose of
expressing an opinion on the effectiveness of the Authority's internal control. Accordingly,we do not express
an opinion on the effectiveness of the Authority's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency,or a combination of deficiencies,in internal
control such that there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a
deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness,yet
important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not
identified. However,as described below,we identified certain deficiencies in internal control that we consider
to be material weaknesses:
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2020-001 MATERIAL JOURNAL ENTRIES PROPOSED BY AUDITORS
Condition: Material journal entries for the proper recognition of various financial statement amounts within
the City's accounting records were proposed by the auditors,which included adjustments to the Authority's
trial balance. In addition,we received several revisions to the City's trial balance (the final version coming
in early December 2020),each of which contained material corrections to previous trial balances.
Criteria: Management is responsible for establishing,maintaining,and monitoring internal controls,and for
the fair presentation in the financial statements of financial position,results of operations, and cash flows,
including the recording of all appropriate journal entries to assure the trial balance from which the financial
statements are prepared, reflect amounts that are in conformity with U.S. generally accepted accounting
principles.
Cause: Over the past several years,the City's Finance Department,who prepares the reconciliations of all
accounts, has reduced in size due to budget reductions, staffing reductions and staffing turnover. These
changes have placed a significant burden on the month and year end close processes,and have contributed
to journal entries not being completed or reviewed timely.
Effect: The Authority's accounting records were initially misstated by amounts material to the financial
statements. Necessary adjustments were brought to the attention of management and were subsequently
recorded in the Authority's general ledger.
Recommendation:We recommend that the Authority take steps to assure that material journal entries are
not necessary at the time future audit analysis is performed.
Corrective Action Response: Management of the Authority will continue to review auditor recommendations/
corrections and internal procedures related to the identification and correction of potential errors in the
financial statements prior to the beginning of future audits. The Finance team will meet to review adjustments
made to this year's financial statements and will develop a plan to address the most significant issues in a
timelier manner going forward. Within budget constraints, Management will look to increase staffing levels
and/or obtain temporary assistance earlier in the fiscal year,in order to perform more timely analyses of the
various account balances.
2020-02 BANK RECONCILIATIONS
Condition: Throughout the year,the City failed to complete bank reconciliations on a timely basis for most
of its cash accounts, including the pooled account which the Authority is part of. Several individual bank
account reconciliations were not completed for the entire fiscal year until approximately four months after
fiscal year end while audit fieldwork was ongoing.
Criteria: Completion of timely bank account reconciliations and review thereof, represent an important
control used to detect and prevent misstatements and errors. Such reconciliations should be completed and
reviewed monthly for all accounts.
Cause: Over the past several years,the City's Finance Department,who prepares the reconciliations of all
entity accounts, has reduced in size due to staffing reductions and staffing turnover. These changes have
placed a significant burden on the month and year end close processes, and have contributed to
reconciliations not being completed or reviewed timely.
Effect: As a result of this condition, all activities that have cash transactions have an increased risk that
misstatements in the accounting records, whether caused by error or fraud, would not be detected and
corrected on a timely basis.
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2020-02 BANK RECONCILIATIONS (concluded)
Recommendation: We recommend the City take steps to assure all bank reconciliations are completed and
tied to the general ledger in a timely fashion and all differences be resolved in a timely manner.
Correction Action Response: Management of the City will work on several areas of improvement to alleviate
this issue.
a. We will continue to review the need for the various bank accounts that have been established over
the years with the view toward more consolidation.
b. We will assign the responsibility for each of the bank accounts to various Finance staff members,
including using City Treasury staff, who will be responsible for reconciling those statements in a
timely manner.
c. We will review the old outstanding reconciling items with the view toward clearing them up before
the end of the next fiscal year.
d. We will look to increase staffing levels in Finance and/or obtain temporary assistance earlier in the
fiscal year,in order to perform more timely analyses of the various bank statements.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority's financial statements are free from
material misstatement, we performed tests of its compliance with certain provision of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
financial statements. However,providing an opinion on compliance with those provisions was not an objective
of our audit,and accordingly,we do not express such an opinion. The results of our tests disclosed no instances
of noncompliance or other matters that are required to be reported under Governmental Auditing Standards.
Authority's Responses to Findings
The Authority's responses to the findings identified in our audit are described above. The Authority's responses
were not subject to the auditing procedures applied in the audit of the financial statements and,accordingly,we
express no opinion on them.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and
the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or
on compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the entity's internal control and compliance. Accordingly,this communication is not
suitable for any other purpose.
December 18,2020
26